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Report shows imbalances in agricultural supply chains

25.11.2014

With ten brands accounting for 15 percent of world food sales, and five retailers controlling half the European marketplace, the risks associated with the food supply chain being captured by just a few companies means that abusive trade practices as well as governance needs to be addressed. Globally, 7 billion consumers are being supplied by 2.5 billion farmers with most of the value of the chain (up to 86%) in the hands of increasingly powerful companies.

Fiona Gooch, policy adviser at Traidcraft: “The relentless pressure on suppliers, degradation of living conditions of farmers and workers, generation of needless food waste, whether inside or outside Europe, creates predictable risks of availability, affordability, and quality (think horsemeat and nutritional concerns) of products for consumers in the midterm, reducing their welfare too. Polarising the problem as to whether consumers gain or farmers and workers on the production side gain is meaningless.”

The concentrations of power within food supply chains mean that abusive Unfair Trading Practices (UTPs) are not accidental but structural. The UK Competition and Markets Authorities, Groceries Code Adjudicator along with other enforcers internationally have a clear responsibility to prevent and punish food companies applying profitable abusive Unfair Trading Practices. Transactions do not occur in a legal vacuum. National legislation and enforcement mechanisms need to be updated to stop these Unfair Trading Practices, not only when applied by retailers but also by large suppliers. Enforcers need to offer protection to suppliers wherever they are based. Inaction not only has predictable devastating consequences for farmers and workers overseas, but will destabilise the UK’s food security.

UK Groceries Code Adjudicator (GCA) was set up in 2013 to stop 10 largest UK retailers applying abusive purchasing buying practices onto their 1st tier suppliers. In July 2014 the European Commission’s Communication on Unfair Trading Practices asked each member state to assess what suitable enforcement mechanisms it had in place to stop Unfair Trading practices throughout the food supply chain, and encouraged more collaboration across Europe by enforcement bodies such as the GCA to catch up with the reality of pan-European sourcing of the largest European retailers. The EC’s Communication recognises both the widespread nature of Unfair Trading Practices, and that it is critical to design an enforcement mechanism in a manner that recognises the climate of fear of weaker suppliers.

Fair Trade movement’s new report raises taboo subjects about how our food supply chains are governed. New report was discussed in European Parliament on 18 November as the new European Commissioners and MEPs settle into new legislative term.

Olivier De Schutter, co-chair of the International Panel of Experts on Sustainable Food Systems and former UN Special Rapporteur on the Right to Food, says “The shifts in power in the agrifood sector have now become too significant, and their impacts too considerable, to be ignored. Power in food chains has long constituted a taboo. Indeed, the need to improve the governance of food systems in order to avoid instances of excessive domination by a small number of major agrifood companies is hardly ever referred to in international summits that seek to provide answers to the challenges of hunger and malnutrition.”

Will the UK take decisive action to enforce & stop UTPs as well take up the following recommendations?

•Modernise its approach to consumer welfare to go beyond price and recognise inherent dependence and link to farmers’ and workers’ welfare.

•Measures to rebalance business power in agricultural chains in the short term, for example by reviewing merger controls, policies on vertical integration, intervening in mergers and acquisitions which have international significance.

•Mechanisms to enhance transparency in agricultural chains so that stakeholders can better identify the risks of abuse of buyer power and unfair trading practices.

•Initiatives to promote and widely spread fairer trading practices in the mid to long run.

Follow the links below for the abstract and full versions of the report.